Tuesday, October 23, 2007

While the big wave of subprime resets is in the pipeline, a second wave of dodgier "option ARM" resets comes a couple of years later.

Option ARMS are are adjustable rate mortgages with different payment options, including interest only and negative amortization payments during the initial periods. In other words you wake up a few years later with a higher interest rate and owing more than you did when you first bought the place.